USDA will change foreign aid program

Like an ATM machine dispensing endless cash to a junkie, the United States continues to throw commodity aid at foreign nations without concern for the consequences. It's undeniable: instead of bolstering potential for U.S. exports, despotic, third-world rulers often use American-supplied commodities to control their people.

Over the years, the few vocal Americans opposed to the current dispensation of aid programs have been talking to an empty room.

That may be changing. USDA recently announced significant changes in how it would deal with Indonesian aid in the future. This, say many of those clamoring for change, is hopefully the first step of an aid program overhaul and overview.

“Look, it's simple. We think we're helping people when we give things to them without demands. It makes us feel good. But it doesn't help the natives, it doesn't help privatization, it just doesn't work,” says long-time, Asian commodity consultant Tom Coyne.

Indonesia as case study

Indonesia is an interesting case-study of how U.S. aid can strengthen the grip of foreign nations' ruling classes while hampering what should be the ultimate goal of aid: finding new, stable markets for U.S. farmers.

The American method of selling to foreign governments is immediately problematic when those governments hold commodity monopolies. Whether it's Indonesia's BULOG (the national supply monopoly for Indonesia, which controls all imports of agricultural commodities), Mexico's CONASUPO or a similar organization, the hold they have is fist-tight.

Many years ago, BULOG was charged by the Indonesian government to guarantee a safe supply of food. Since rice is so important in Indonesia, BULOG was charged with maintaining a solid stock of the grain.

In 1966, the United States recognized that General Suharto, who was Indonesia's acting president, needed help to pull Indonesia off the socialism/communism path that had been followed previously. With this in mind, it was easy to persuade Congress to restore Public Law (PL) 480 shipments of rice to Indonesia to feed the people and shipments of cotton to revive the textile industry there.

But while U.S. aid helped hold communism at bay, it encouraged corruption. Over the decades, the aid shipments continued even as the PL480 program was bent and subverted from the Indonesian/BULOG side.

Coyne says that the United States was blind to this fact: U.S. rice aid was being used as a food ration not only for the Indonesian military, but for all governmental employees of companies previously nationalized by Sukarno. While there are private companies in Indonesia, all those in the national bureaucracy gets free rice from the government.

“Now, if you want to get someone to vote a certain way, what's an easy way to do it? Control the food. If the source of rice is BULOG, then whoever controls BULOG will get the majority of votes. This isn't theoretical — it's cold, hard politics,” says Coyne, who spent many years living and working in southeast Asia.

On April 9, USDA stated that it has stopped granting public law (PL) 480 to the Indonesian government as a result of the government's worsening performance. In past years, the U.S. assistance has been G-to-G (government to government) but as of this year, USDA is providing the aid directly to the private business sector of Indonesia — something Coyne and others say was long in coming.

“If we don't get foreign governments off this welfare system, we're subsidizing government systems that aren't only uneconomical, but that distort the economy. To help develop a private sector that can supply food and contract efficiently is precisely what we should be doing. This is a step in the right direction. We should have been doing it a long time ago.”

PL480 is a concessionary program with a view towards promoting exports of U.S. commodities. It's also the basis for a sustainable development program in the recipient countries.

“If it simply helps the foreign governments continue on a corrupt path, that isn't development, but sustaining. What we need to develop is the private sectors within these countries,” says Coyne.

If the United States wants to develop a third-world country's private sector, we must show the need for processing and packing plants and materials, says Coyne. That way U.S. agricultural commodities can be shipped to those countries in bulk and packaged there — a far cheaper and more efficient practice than how it's done now. Usually, aid now arrives pre-packaged and stamped with “U.S. Aid” on the side of bags.

“It's incredible how many savings there are by shipping bulk rice instead of having it bagged up here in the States. There's also the idea of consumer recognition. How is the U.S. farmer helped by a bag stamped with ‘U.S. Aid?’”

“…we're subsidizing government systems that are uneconomical, and that distort the economy.”

What should be happening instead, says Coyne, is private companies developing name-brands that native consumers will recognize and seek out. That privatization will, in turn, lead to better export markets for U.S. agriculture.

“If the U.S. exports a 50-kilo bag of something to a third-world country, it's likely they don't have the same units of measurement that we take for granted.”

It isn't just translating one country's weight system to another's, says Coyne. Within some foreign countries, a one-kilo measure in one area may only be worth .75 of a kilo in another. They may use a pineapple can for measurements in one market and a smaller tomato can in another.

For example, an Indonesian “catty” is the unit of measure for that country, says Coyne. But it isn't standard. One catty in north Jakarta isn't the same as a catty in south Jakarta. Why?

“Because they measure cattys with empty tin cans. It's easy to laugh at that, but we have to be concerned if we're going to export commodities to them. It's absolutely essential that we reinforce that these countries need a uniform measure and proper packaging.”